May 31 • Q&A
Are Short Sales Worth Pursuing as a Wholesaler?
Received this response from the listing agent to my offer at $109,550:
"Well will you go to $156,500 with no assignable contract? Otherwise it will automatically be denied by the bank with this being a short sale (with appraisal in file)."
So, are short sales worth pursuing as a quick cash flow strategy?
The answer, especially if you are early in your investing journey is an unequivocal NO.
Let us count the reasons why:
- 𝗕𝗮𝗻𝗸𝘀 𝗔𝗿𝗲 𝗡𝗼𝘁 𝗠𝗼𝘁𝗶𝘃𝗮𝘁𝗲𝗱 𝗦𝗲𝗹𝗹𝗲𝗿𝘀: A distressed homeowner may be motivated, but the bank usually isn't. (Or at least tries to make like they're not.) They're just trying to minimize loss and justify the payoff internally.
- 𝗔𝘀𝘀𝗶𝗴𝗻𝗺𝗲𝗻𝘁𝘀 𝗔𝗿𝗲 𝗙𝗿𝗲𝗾𝘂𝗲𝗻𝘁𝗹𝘆 𝗥𝗲𝘀𝘁𝗿𝗶𝗰𝘁𝗲𝗱: Many short sale approval letters prohibit assignments, double-close markups, same-day resales, or even resale within a certain period.
- 𝗔𝗽𝗽𝗿𝗼𝘃𝗮𝗹 𝗧𝗮𝗸𝗲𝘀 𝗙𝗼𝗿𝗲𝘃𝗲𝗿: Wholesaling is all about speed, certainty and momentum. Short sales are all about waiting, more waiting and additional waiting.
- 𝗧𝗵𝗲 𝗦𝗽𝗿𝗲𝗮𝗱 𝗚𝗲𝘁𝘀 𝗦𝗾𝘂𝗲𝗲𝘇𝗲𝗱: Suppose ARV = $250k, rehab = $60k and you think the deal is worth $120k. The bank appraisal says $165k. Guess who usually wins? The bank. Oops, there went your spread.
𝗠𝗼𝗿𝗮𝗹 𝗼𝗳 𝘁𝗵𝗲 𝘀𝘁𝗼𝗿𝘆: Except in rare instances where it's worth your while to exercise extreme patience, stay away from short sales.
(See attached)
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Are Short Sales Worth Pursuing as a Wholesaler?
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